And Full Year of 2018 - 4th Quarter - Enauta
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EARNINGS RELEASE
4 Quarter
th
and Full Year
of 2018
CONFERENCE CALL
Portuguese (simultaneous English translation)
March 19, 2019
12:00 pm (Brazilian Time)
11:00 am (US EDT)
Dial in Brazil: +55 11 3193-1001 ou +55 11 2820-4001
Dial in United States: +1 646 828-8246
Code: Enauta
QGEP PARTICIPAÇÕES S.A.
Av Almirante Barroso, nº52, Sala 1301 – Centro
Rio de Janeiro – RJ | Cep: 20031-918
Phone: +55 21 3509-5800
www.enauta.com.brEARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
QGEP now is Enauta 1
Rio de Janeiro, March 18th, 2019
QGEP Participações S.A. (“Company”, B3: QGEP3) today announced its rebranding as Enauta.
The Company decided to rebrand to reflect on its existing strengths and achievements, which
ensure the long-term sustainability and continued growth of its operations. The foresight to
recognize new possibilities and the commitment to address them has been part of our history
since the Company’s inception.
As a leading independent player in Brazil’s energy sector, today’s Enauta brings with it a rich
history of accomplishments, a large technical portfolio and technological know-how, as well as
engagement in environmentally sound practices. Supported by the experience gained over the
last 20 years, the Company continues to invest in state-of-the-art technology to explore,
develop and produce oil and gas in the waters off Brazilian coastline.
Our new name is derived from the essence of our Company, which is rooted in our ability to
identify, locate and develop energy sources to meet the needs of society. Our purpose
continues to be to clear the path for energy. With this name change comes a new beginning.
Today, as the spectrum of energy production is expanding and creating new opportunities, we
are preparing ourselves for the future—as Enauta.
On March 12th, 2019, our Board of Directors approved a proposal to consider the name change
at our Extraordinary General Meeting that will take place on April 18, 2019. The proposal calls
for the Company’s new name to be Enauta Participações S.A. The Company’s wholly owned
subsidiary Queiroz Galvão Exploração e Produção S.A. will also consider a name change to
Enauta Energia S.A. at its next Extraordinary General Meeting, on April 17 th, 2019. The Company’s
shareholder structure will remain the same.
The Company’s shares will continue to trade under the ticker symbol QGEP3 until the name
change is approved and until the request for a ticker symbol change has been approved by B3.
More information on the symbol change will be forthcoming when available.
For this Report, QGEP Participações S.A. will be referred to as “Enauta” or “Company”.
Enauta Reports 4Q18 and 2018 Results
Enauta today announced results for the fourth quarter, ended December 31, 2018. The financial
and operating data in this press release, except where indicated otherwise, are presented on
a consolidated basis as per the accounting practices adopted in International Financial
Reporting Standards (IFRS), as described in the financial section of this release.
Manati Field
Average daily gas production was 4.8MMm³ in 4Q18, reflecting demand for gas to meet energy
needs in the northeastern region of Brazil. In 2018, average daily production reached 4.9MMm³.
Based on the current outlook for market demand, the Company estimates full year 2019
average daily production at 4.1MMm³, at the lower end of our initial forecast.
Atlanta Field
Total fourth quarter production, net to the Company, was 572.3 kbbl of oil, equivalent to
average daily production of 12.4 kbbl. The net amount to the Company is now 50% reflecting
the decision of the Arbitration Tribunal affirming Dommo Energia S.A.’s exit from BS-4
Consortium.
Net Revenue
Net Revenue in 4Q18 was R$298.7 million, an increase of 105.8% compared to 4Q17, reflecting
stable Manati production and the eight monthcontribution from Atlanta Field.
1EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
Net Income 2
Net Income was R$125.3 million in the quarter, compared to R$193.0 million in 4Q17. In 2018,
net income amounted to R$425.2 million, 19.0% higher than in 2017, a record result for the
Company.
EBITDAX
EBITDAX was R$159.7 million, compared to R$239.8 million in 4Q17, when the Company
benefitted from a gain on the sale of Block BM-S-8.
Shareholder Remuneration and Cash Balance
Proposed total dividends of R$500 million, or around R$1.91 per share. Cash Balance(1) of R$1.9
billion at quarter-end similar to the level recorded at year-end 2017.
TOTAL PRODUCTION NET REVENUE (R$ MILLION) EBITDAX (R$ MILLION) NET INCOME (R$ MILLION)
(THOUSAND BOE)
58.9%
29.2% 450,0
425,2 133% 140%
797,2
700,0
81%
100% 400,0
357,4
574,8
120%
600,0 80% 350,0
105.8% 500,0
53% 60%
300,0
100%
25.8% 501,7 407,9 250,0
193,0
80%
6.591,3 400,0
72% 40%
239,8 125,3
200,0
60%
5.102,9 298,7 300,0
159,7
20%
150,0
40%
1.851,6 145,1 200,0
-
0%
100,0 71% 53% 42%
1.471,4 20%
31%
100,0 -20% 50,0
- 0%
- -40%
2017 2018 4Q17 4Q18 2017 2018 4Q17 4Q18 2017 2018 4Q17 4Q18
2017 2018 4Q17 4Q18
EBITDAX Margin Net Margin
Management Commentary
Fourth quarter operating results represented a
positive end to another milestone year for the
Company, reflecting the implementation of
several actions that have positioned us for
continued growth.
This also was the first year in which the Company benefitted from two producing assets, which
were on line for most of the year.
The Company reported record net income in 2018 of R$425 million, up 19% from the previous
year, reflecting production from the Manati and Atlanta Fields and in line with our expectations.
The fourth quarter was a major contributor to this performance, with EBITDAX reaching R$160
million and revenue of R$298 million. Total production in the fourth quarter was 1,852 thousand
barrels of oil equivalent, averaging 20.1 thousand barrels of oil equivalent per day, 26% ahead
of year-ago levels.
Daily gas production from the Manati Field averaged 4.8MMm³ in the fourth quarter, ending the
year averaging 4.9MMm³ per day, consistent with our projections. This was primarily due to
drought conditions in Northeast Brazil, which increased the demand for natural gas to meet
(1) Includes cash, cash equivalents and marketable securities. 2EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
the region’s energy needs. Similar to last year, this situation reversed itself in early 2019, as3
high rainfall levels enabled the return of hydroelectric generation, bringing average daily
production at the Manati Field to 3.5MMm³ in the first two months of 2019. At the end of the
first quarter of 2019 we will have a maintenance shutdown at the Field, which will last
approximately 20 days. Taking this into account, we still believe average daily production from
the Manati Field can reach 4.1MMm³ in 2019, which is at the lower end of the initial forecast
for the year. We continue to closely monitor this situation, and may have to revise our estimate
if the lack of demand persists.
Conversely, the situation at the Atlanta Field moved in a positive direction. In January, the
Brazilian Administrative Council for Economic Defense - CADE, published its findings with
respect to the BS-4 Block, and after completing their analysis of applicable laws to market
concentration, determined there is no restriction against transferring the Dommo Energia S.A.’s
ownership of the Block to the Company and to our partner, Barra Energia S.A.. This decision
follows a favorable ruling from the Court of Appeals, affirming that Dommo Energia’s 40%
ownership of Block BS-4 should be divided equally between our Company and Barra,
consistent with the terms of the consortium agreement. Therefore our share in BS-4 increased
to 50% from 30%. The Company, along with Barra, has also requested the National Agency of
Petroleum, Natural Gas and Fuel – ANP to proceed with the formalization of the transfer of the
additional interest under the terms of the consortium jointly operating agreements.
Oil production from the two wells in the Atlanta Field averaged 12.4 thousand barrels per day
in the fourth quarter, similar to our expectations, bringing average daily production for eight
months of 2018 to 12.0 thousand barrels of oil, inclusive of the stabilization phase. Heavy oil
prices relative to Brent continue to be favorable, due to the worldwide supply/demand
imbalance, which is primarily the result of lower supply of this type of oil produced by
Venezuela and Saudi Arabia. We are producing heavy oil that has a very low sulfur content,
putting it in compliance with new regulations for bunker fuel that will go into effect in 2020.
We began drilling a third Atlanta well in late February that is scheduled to be completed in the
second quarter of this year. Once the third well is producing, the rig will begin workover
operations on each of the two existing wells, in order to replace the damaged pumps. Thus, we
expect production from at least two wells at Atlanta through the end of this year’s third quarter,
moving up to production from three wells that is estimated at between 25,000 and 27,000
barrels of oil per day.
The Company published reserve certification reports from Gaffney, Cline & Associates (GCA) for
the Atlanta and Manati Fields, updated on December 31, 2018. Total 2P reserves, net for the
Company, was 130 million boe, an increase of 64% compared to the 2017 reserves.
Exploration activities continued apace in the fourth quarter. In February, we received the initial
data from the 3-D seismic shot on our 6 continuous Sergipe-Alagoas Basin blocks, which the
consortium will analyze over the coming months. The timetable for a drilling program there
remains in 2020. As for the Pará-Maranhão blocks, the first round of the farm-out process has
been completed, we are pleased with the level of interest it has attracted, and the technical
evaluation is quite promising. We are working together with other concessionaires in the
equatorial margin to overcome challenges in gaining drilling licenses from IBAMA, the Brazilian
environmental authority.
Our full year 2018 results showed substantial growth on a year-over-year basis, with EBITDAX
up 41% and Net income 19% ahead of 2017 levels. The Company ended the year with cash and
cash equivalents of over R$1.9 billion. Based on our strong financial position, management has
recommended another special cash dividend in the amount of R$500 million to be distributed
to our shareholders of record on April 18, 2019, the date of our Annual Shareholders’ Meeting.
Following this disbursement, our cash position, projected cash flow and strong balance sheet
will provide sufficient funds to support our operations and projected capital expenditures, as
well as to maintain our ability to make opportunistic additions to our asset base.
3EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
4
We are pleased to note that this represents
the second consecutive year in which our
strong performance and disciplined financial
management have enabled us to return
capital to our investors in the form of a
special dividend.
We have entered 2019 with several tailwinds that we expect to result in continued growth for
the Company. First, we will have a full year of Atlanta Field production, which should accelerate
significantly once the three wells are in production later in the second half. The expected
production rate at Atlanta more than offsets the projected decline in Manati production.
Moreover, the Atlanta Field will become an increasingly important asset for us in 2019 for
several reasons: we are the operators and now have a 50% ownership position; pricing
conditions are favorable and likely to be further enhanced by both continued shortages and
requirements for low sulfur oil; and, the revenue generated from Atlanta oil sales act as a
natural hedge against fluctuations of the Brazilian Real.
As we move through 2019, we will have greater data on our 6 blocks in the Sergipe Alagoas
Basin, where we are 30% partners in a consortium led by ExxonMobil. These blocks represent
the cornerstone of our exploratory portfolio, and we consider them low to medium risk
prospects with high potential volume, given their location adjacent to other discoveries.
Our strong balance sheet, which has been a key differentiator for many years, gives us the
distinction of being one of financially strongest independent companies in Brazil’s oil and gas
industry.
Over the last two years, in addition to the strategic realignment of our portfolio, we have
reassessed how best to ensure the Company’s sustainable growth in the periods ahead. In
order to capitalize on our existing strengths, investments and independence, we announced
today that the Company will change its name to Enauta, encompassing our energy focus, our
investments in technology, and our engagement in environmentally safe practices. Since
inception, the Company has been one of Brazil’s main independent players in the industry. We
were one of the first to enter the country’s oil and gas sector; the discovery of gas in the Manati
Field enabled the development of infrastructure for offshore gas production in the Northeast;
and today we are one of the few Brazilian independent companies operating in the premium
pre-salt area. This history has brought us comprehensive experience, which we build on every
day to safely produce the energy needed by Brazilian industries. Over the years, we also
invested in technologies to support the safety of our operations and provide critical
information about the ecological balance of mangroves and the Brazilian ocean. We share this
information with the communities we are present in, establishing partnerships with them to
foster the sustainability of these valuable resources in the long term.
4EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
5
Enauta represents a new beginning for us, as
we evolve as energy producers, but it is also
rooted in our history and DNA. The company
has always stood out for its ability to identify,
locate and develop energy sources to meet
the needs of society. This is our purpose: to
clear the path for energy.
ENAUTA’S ASSETS
Bacia Bloco/ Campo/ Participação Categoria Fluido
Concessão Prospecto Enauta Recursos
BCAM-40 Manati 45% Reserve Gas
Camamu
CAL-M-372 CAM#01 20% Prospective Oil
Atlanta Reserve Oil
Santos BS-4 Oliva 50%* Contingente Oil
Piapara Prospective Oil
ES-M-598 20% Prospective Oil
Espírito Santo
ES-M-673 20% Prospective Oil
Foz do Amazonas FZA-M-90 100% Prospective Oil
PAMA-M-265 100% Prospective Oil
Pará-Maranhão
PAMA-M-337 100% Prospective Oil
Ceará CE-M-661 25% Prospective Oil
SEAL-M-351 30% Prospective Oil
SEAL-M-428 30% Prospective Oil
SEAL-M-501 30% Prospective Oil
Sergipe-Alagoas
SEAL-M-503 30% Prospective Oil
SEAL-M-430 30% Prospective Oil
SEAL-M-573 30% Prospective Oil
th
*As previously disclosed by the Company, on September 25 , 2018 the Arbitral Tribunal declared the validity of Dommo
Energia S.A.’s expulsion from BS-4 Consortium and the loss of 20% Participation for the Company in the Block. The
decision is beign implemented before the Arbitral Tribunal and appropriate Brazilian authorities.
5EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
Enauta’s Assets 6
Production: MANATI FIELD
Block BCAM-40; Working interest: 45%
Average daily gas production at the Manati Field, one of the main gas suppliers in the
Northeast Brazilian region, was 4.8MMm³ in fourth quarter 2018, with lack of rainfall for
hydropower production the major demand driver. In last year’s fourth quarter, the lack of
rainfall resulted in even higher demand, leading to average daily production levels of
5.6MMm³. For full year 2018 average daily production was 4.9MMm³, similar to 2017 and in line
with the Company’s guidance.
Significant rainfall considerably lowered natural gas demand in the first two months of 2019
to 3.5MM³ per day. Additionally, maintenance at the Field’s processing plant is scheduled for
the end of 1Q19, which will curtail production for about 20 days, with an investment of
approximately US$6 million to the consortium. With that, our forecast for average daily
production at the Manati Field in 2019 remains 4.1MMm³, on the lower end of our forecast for
the year. We will continue to monitor the situation closely, and it may be necessary to reduce
our estimate if lack of demand persists.
The reserve certification for the Manati Field prepared by GCA updated on December 31, 2018
indicated that 2P reserves for 100% of the Field totaled 6.3 billion (10^9) m³ of natural gas and
0.66 million (10^6) barrels of condensed gas, corresponding to approximately 40.3 million boe
of gas, slightly above the previous certification, considering the reduction of produced volume.
(1,000 m3 de gás = 1 m3 de óleo equivalente)
Production: ATLANTA FIELD
BlocK BS-4; Working Interest: 50%*; Operator
*As previously disclosed by the Company, on September 25th, 2018 the Arbitral Tribunal declared the validity of Dommo
Energia S.A.’s expulsion from BS-4 Consortium and the loss of 20% Participation for the Company in the Block. The
decision is beign implemented before the Arbitral Tribunal and appropriate Brazilian authorities.
With two producing wells, total fourth quarter production of Atlanta, net to the Company, was
572.3 kbbl of oil, equivalent to average production for the period of 12.4 kbbl per day. The
reduction in average daily production when compared to 3Q18 reflects the normal decline and
is expected to continue until the pumps inside the well are repaired. The net to the Company
amount considers a 50% participation, up from 30% previously, reflecting the exit of Dommo
Energia, S.A. from the Consortium, as previously disclosed. Average production from Atlanta for
the eight months of 2018 was 12.0 kbbl, including the stabilization phase. The Company has a
crude oil sales agreement in force with Shell Oil, for all of the oil production from the Atlanta
Field Early Production System (EPS).
As previously reported, the Consortium has elected to drill a third well for the EPS in Atlanta.
The Laguna Star drillship left the shipyard in mid-February and drilling activities have
commenced. Upon conclusion of the drilling and completion as well as the start of production
of the third well, estimated at around 90 days, the rig will be moved to one of the current wells
to replace the pump inside the well, an activity that should last approximately 45 days. At the
end of this intervention, the rig will be moved to the second well to perform similar activities.
The total investment for drilling the third well is expected to reach $45 million for the
Consortium, and total cost of interventions is also expected to reach $45 million. Taking into
account production start-up of the third well and each of the current two wells not producing
for approximately 45 days, the Company will have continuous production from at least two
6EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
wells throughout the entire year in 2019. Once the third well is on line and the pumps are7
repaired, which is likely to be by the end of the third quarter of 2019, average production from
the three wells in the Field is expected to reach 25-27 thousand barrels per day.
90 days 45 days 45 days
Feb/19: 3Q19:
Beginning of the Beginning of the
Beginning of the 3 wells in production:
intervention 1st intervention 2nd
drilling of the 3rd well 25-27kbbl
producing well producing well
Total CAPEX: U$45 million Total OPEX: U$45 million
Based on 100% of Atlanta Field, in 4Q18, total lifting costs were US$359.4 thousand/day,
equivalent to US$30.9/bbl. This compares with US$31.1/bbl in 3Q18 and US$41.8/bbl registered
in 2Q18, when the Field was in its stabilization period. After the first 18 months of production,
operating costs are expected to be US$480 thousand/day, and will fluctuate with variables,
largely tied to the Brent oil price.
4Q18 3Q18 ∆%
Lifting cost (US$ million) 35.4 36.9 -3.9%
Lifting cost (US$ thousand/day) 359.4 400.6 -10.3%
Lifting cost (US$/bbl) 30.9 31.1 -0.5%
Produção (Thousand bbl) 1,144.6 1,185.2 -3.4%
This quarter, the Company made an agreement with the FPSO Petrojarl I provider in the amount
of R$45.9 million due to a compensation for delayed the delivery of the FPSO as established in
the contract. In this regard, the Company recorded the equivalent to 50% of revenues totaling
US$23.7 million, plus interest rates at the end of each calendar month, after August 10, 2018.
The residual balance of Contract Value will be offset during the following 15 months of charter
invoices, resulting in a daily compensation of US$25,000 over the applicable charter daily fee.
The first phase of the arbitration proceeding related to Block BS-4, where the Atlanta Field is
located, was concluded in September 2018. The Arbitration Tribunal found in favor of the
Company and its Partner, Barra Energia., in expelling Dommo Energia S.A. from the consortium
retroactively to October 11, 2017. Consequently, the Company’s stake in Block BS-4 increased
from 30% to 50%, and it now bears all economic benefits and associated costs related to the
additional 20% share. Most recently, the Company was advised by CADE - the Brazilian
Administrative Council for Economic Defense - of its findings that there is no anti trust barrier
to transfering of Dommo Energia’s 40% ownership in Block BS-4 in equal amounts to the
Company and Barra Energia. The Company, along with Barra, has also requested the National
Agency of Petroleum, Natural Gas and Fuel – ANP to proceed with the formalization of the
transfer of the additional interest under the terms of the jointly operating consortium
agreements.
In a second phase, the Arbitration Tribunal confirmed the Company’s rights to recover the
amounts of cash calls due and not paid by Dommo up through the date of the expulsion,
October 2017, amounting to R$44 million, 50% of which owed to the Company. The Tribunal also
confirmed the Company’s rights to be reimbursed of all arbitration costs incurred up to the
moment. The Arbitration Tribunal is still in place for new requirements from the parties.
7EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
The Company published a reserve certification report by GCA for the Atlanta Field on December8
31, 2018, which determined 2P reserves of 100% of the Field amounting to 224 million barrels,
an increase of 17% in the reserve compared to the certification disclosed after conclusion of
the drilling and testing of the first producing well in 2014. The new certification includes both
data for the second producing well and production for full-year 2018. 1P reserves of 100% of
the Field totaled 174 million barrels, an increase of 18% in the reserve compared to the
certification disclosed in 2014.
Update on the Exploration Portfolio
SERGIPE-ALAGOAS BASIN
Working Interest: 30% in 6 blocks
The Sergipe-Alagoas Basin represents the core of our exploration portfolio. The Company has
a 30% stake in six blocks located in ultra-deep waters, 80 to 100 km away from the coast, in
partnership with ExxonMobil, operator with 50% working interest and with Murphy Oil, which
owns the remaining 20%.
The ultra-deep water region of this Basin is considered by the Company to have high
exploratory potential and medium-low risk, with six significant discoveries already registered
by Petrobras in adjacent areas. The main oil system in this region of the Basin is similar to
other discoveries made in the Guyana and the West African coast.
The Company and its partners have already received and are currently analyzing the initial 3D
seismic data on the 6 contiguous blocks. Early reads are encouraging. Throughout 2019, as it
awaits an environmental license, the consortium will continue to evaluate the seismic data,
and develop a drilling program, expected to commence early in the second half 2020.
EQUATORIAL MARGIN
Working Interest: Various
The Company has 100% ownership interests in both the PAMA-M-265 and PAMA-M-337 blocks
of the Pará-Maranhão Basin and the block FZA-M-90 at the Foz do Amazonas Basin. The oil
system for the ultra-deep waters of these basins is similar to the one successfully tested in
Sergipe-Alagoas, Guyana and the West African Margin, with reservoirs and contemporary
generating sections.
3D seismic data acquisition and processing have been completed for the three blocks and the
Company completed its evaluation during 2018.
The first phase of the farm-out process for the Pará-Maranhão Basin blocks has been
completed and has attracted several interested potential partners. We are currently working
to gauge the likely timing of an environmental license, which is an important element to
consider. The Company expects that the farm-out process will be completed in 2019.
OTHER
On October 26, 2018 the Company announced that the Consortium of Block BCAM-40 has begun
the relinquishment process with the ANP of the Camarão Norte Discovery located south of the
Manati Field, in the Camamu Almada Basin. The Company holds a 45% interest in the Camarão
Norte Discovery, which was declared commercial in 2009. After evaluating several development
8EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
plans and potential unitization to the adjacent area, the Consortium concluded that the area9
is not economically viable and opted for its relinquishment. The carrying value of the Camarão
Norte Discovery of R$13.4 million net to the Company, and was taken as a charge in third quarter
2018.
Financial Performance
Income Statement and Financial Highlights (R$ million)
4Q18 4Q17 ∆% 2018 2017 ∆%
Net Revenue 298.7 145.1 105.8% 797.2 501.7 58.9%
Costs (181.9) (55.2) 229.5% (458.6) (227.7) 101.4%
Gross Profit 116.8 89.9 29.9% 338.7 274.0 23.6%
Operating income (expenses)
General and administrative
(20.6) (15.5) 32.9% (51.3) (52.1) -1.6%
expenses
Equity Method 0.6 (0.5) -222.4% 0.1 (1.8) -106.4%
Exploration Expenditures (9.0) (3.3) 172.7% (54.5) (27.7) 96.6%
Other net operational revenues
41.0 149.9 -72.6% 187.7 149.9 25.2%
(expenses)
Operating income (Loss) 128.9 220.6 -41.6% 420.6 342.3 22.9%
Net Financial Result 18.4 13.0 42.0% 115.5 92.3 25.1%
Income before income tax and
147.3 233.6 -36.9% 536.1 434.6 23.4%
social contribution
Income tax and social
(22.0) (40.5) -45.7% (110.9) (77.2) 43.6%
contribution
Net income (Loss) 125.3 193.0 -35.1% 425.2 357.4 19.0%
Net cash inflows from
159.6 216.9 -26.4% 588.5 428.8 37.2%
operating activities
EBITDAX(1) 159.7 239.8 -33.4% 574.8 407.9 40.9%
Some percentages and other figures included in this report were rounded to facilitate presentation and therefore may present
slight differences in relation to the tables and notes presented in the quarterly information. In addition, for the same reason, the
totals presented in certain tables may not reflect the arithmetic sum of the preceding figures.
(1)
EBITDAX is a measure used by the oil and gas industry calculated as follows: EBITDA + exploration expenses with subcomercial
and dry wells. The Company calculates EBITDA as profit before taxes and social contributions, net financial results and amortization
expenses. EBITDA is not a financial measure according to Brazilian GAAP or IFRS. It should also not be considered in isolation or as
a substitute for net income, as a measure of operating performance, or as an alternative to operating cash flow as a measure of
liquidity. Other companies may calculate EBITDA differently than the Company. Furthermore, EBITDA has limitations which inhibit
its usefulness as a measure of the Company’s profitability as it does not consider certain costs inherent in the business, which
could significantly impact net results, such as financial expenses, taxes and amortization. EBITDA is utilized by the Company as an
additional measure of its operating performance.
Fourth quarter 2018 financial results benefitted from a full quarter of production from the
Atlanta Field and steady production from Manati, which together resulted in substantial
revenue growth compared to the similar period in 2017. In addition, after the favorable
arbitration ruling, in 4Q18 the Company accounted for the impact (since October 2017) from
the additional stake of 20% in Block BS-4, where the Atlanta Field is located.. EBITDAX, in turn,
benefitted from the higher production, as well as an improved cost structure.
During the quarter, the Company received R$40.9 million from Teekay as non-operating
revenues related to damages payment for the delayed arrival of FPSO Petrojarl I at Atlanta
Field, while 4Q17 EBITDAX benefited from the gain on the sale of Block BM-S-8. The Company
ended the period with a solid cash position of R$1.9 billion, which provides significant funds
to support its capital expenditures and the capital allocation programs.
9EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
10
FOURTH QUARTER 2018 FINANCIAL HIGHLIGHTS:
Net revenue was R$298.7 million, an increase of 105.8% over 4Q17. Of the total, R$126.1
million was attributable to the Manati Field, 13% below 4Q17. Total revenue included a full
quarter contribution from the Atlanta Field, which represented 58% of total revenue, and
also benefitted from the increase in the Company’s stake in the Field from 30% to 50%. The
impact on revenue related to the additional 20% stake in Atlanta Field totaled R$115.1
million, of which: (i) R$21.9 million related to 2Q18; (ii) R$55.9 million related to 3Q18; and
(iii) R$37.9 million related to 4Q18.
Exploration expenses were R$9.0 million in 4Q18, compared to R$3.3 million in 4Q17, mainly
due to the acquisition and seismic processing of the Sergipe-Alagoas blocks.
Total operating costs were R$181.9 million in the quarter, more than triple the 4Q17 level of
R$55.2 million attributable to costs associated with the ramping up of production at the
Atlanta Field. The impact on operating costs related to the additional 20% stake in Atlanta
Field totaled R$95.9 million, of which: (i) R$18.6 million related to 2Q18; (ii) R$40.8 million
related to 3Q18; and (iii) R$36.5 million related to 4Q18.
Manati Field operating costs were R$14.5 million, 73.7% lower than 4Q17, when the Company
incurred expenses of R$6.0 million associated with repair of the damaged flow line. In 4Q18,
we adjusted the provision for abandonment of Manati, due to a reversion of depreciation
resulting from the curve revision, in the amount of R$33.3 million, to follow the new expected
production curve.
Operating expenses at the Atlanta Field were R$167.4 million with production costs of
R$103.4 million, up 144.7% from 3Q18 due to the increase in the Company’s stake in the Field
from 30% to 50%. A total amount of R$47.7 million was accounted for as depreciation and
amortization. To calculate the amount of the investment recorded in property, plant and
equipment, the Company used the developed reserve of 15 million barrels, while for the
depreciation of the intangibles, the Company used the 1P reserve of 174 million barrels,
according to the GCA certification issued in 2018.
Manati Field (R$ million) 4Q18 4Q17 ∆% 2018 2017 ∆%
Production costs 17.5 14.4 21.8% 78.4 84.0 -6.7%
Maintenance costs 1.1 6.0 -81.9% (5.1) 24.0 -121.2%
Royalties 9.9 11.3 -12.4% 39.5 39.0 1.4%
Special Participation 1.9 2.4 -20.1% 6.9 6.2 11.7%
R&D 1.3 0.5 172.9% 4.7 4.5 6.7%
Depreciation and amortization (17.1) 18.7 -191.8% 39.5 62.8 -37.2%
Other 0.0 2.0 n.a. 0.7 7.4 -90.6%
TOTAL 14.5 55.2 -73.7% 164.6 227.7 -27.7%
Atlanta Field (R$ million) 4Q18 4Q17 ∆% 2018 2017 ∆%
Production costs 101.3 0.0 n.a. 165.8 0.0 n.a.
Maintenance costs 2.1 0.0 n.a. 3.4 0.0 n.a.
Royalties 16.3 0.0 n.a. 25.9 0.0 n.a.
Depreciation and amortization 47.7 0.0 n.a. 98.9 0.0 n.a.
TOTAL 167.4 0.0 n.a. 293.9 0.0 n.a.
10EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
11
General and administrative expenses totaled R$20.6 million, up 32.9% from the same period
of the prior year. As a percentage of total revenue, G&A improved by 160 basis points. The
absolute increase in Reais reflects personnel expenses and costs associated with employee
profit sharing, which were partially offset by the higher allocation of expenses to partners
for projects operated by the Company.
Other operating revenue amounted to R$41.0 million, of which R$45.9 million was related to
the agreement with the supplier associated with the delayed arrival of FPSO Petrojarl I at
Atlanta Field.
EBITDAX in the period was R$159.7 million, benefitted from the agreement with the supplier
related to the delayed arrival of FPSO at Atlanta Field of R$45.9 million. Fourth quarter 2017
EBITDAX was R$239.8 million and included a gain of approximately R$150 million from the
sale of Block BM-S-8. Excluding these gains in both periods EBITDAX was R$113.8 million in
4Q18 and R$89.9 million in 4Q17.
Net financial income was R$18.4 million, 42% higher than R$13.0 million in 4Q17 mainly due
to higher interest rates.
Net income decreased 34.6% to R$125.3 million, from R$193.0 million in 4Q17, mainly as in
2017 we received half the amount related to the sale of Block BM-S-8 as a result in the 4Q17.
Operating cash flow totaled R$159.6 million, compared to R$216.9 million in 4Q17.
FULL YEAR 2018 FINANCIAL HIGHLIGHTS:
Net revenue was R$797.2 million, up 58.9% from 2017. This increase was driven by the eight
month contribution of oil production at the Atlanta Field and the increase in stake from 30%
to 50%, as well as steady production from the Manati Field.
Total operating costs were R$458.6 million, 101.4% higher than the same period of the prior
year, start-up production costs at the Atlanta Field, partially offset by the reduction in
operating costs at Manati Field, resulting from lower maintenance costs as well as lower
depreciation & amortization costs in the period.
The maintenance cost of Manati totaled a credit of R$ 5,1 million, having benefited from
insurance income of R$6.2 million. The maintenance cost in 2017 totaled R$24.0 million due
to an incident that occurred in the Field.
General and administrative expenses totaled R$51.3 million, 1.6% lower than the same
period of the prior year. The decrease reflects higher allocation to projects operated by the
Company, partially offset by higher costs associated with employee profit sharing.
Exploration expenses were R$54.5 million, up 96.6% from full year 2017. The increase was
primarily due to the relinquishment of the Pernambuco-Paraíba Basin blocks and the
Camarão do Norte Discovery in the period, resulting in a write off of R$24.3 million.
Other Net Revenues totaled R$187.7 million in 2018 and R$149.9 million in 2017. One of the
impacts in this account is the receipt of 50% of the total of US$389 million related to the
sale of 10% of interest in Block BM-S-8, of which the Company accounted for 38% of the
total amount in 4Q17 and 12% in 1Q18, amounting to R$154.3 million and R$147.6 million,
respectively. Also in 2018, the Company recognized in this account the agreement of R$45,9
million related to the delayed arrival of FPSO Petrojarl I at Atlanta Field.
For the full year, EBITDAX was R$574.8 million, up 40.9% from the R$407.9 million reported
in 2017. As discussed earlier, both periods benefitted from one-time gains, such as (i) in
11EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
2018 the recognition of R$45.9 million related to the delayed arrival of the FPSO Petrojarl 12I
in Atlanta Field and of R$147.6 million related to the first installment from the sale of Block
BM-S-8 and (ii) R$ 154.3 million in 2017 of the result related to the second installment from
the sale of Block BM-S-8. Excluding those gains, EBITDAX was R$381.3 million and R$253.6
million in 2018 and 2017, respectively. The adjusted EBITDAX margin in 4Q18 was 47.9%,
compared to adjusted EBITDAX margin of 50.6% in 2017.
Net financial income was R$115.5 million, compared to R$92.3 million in 2017. This is
primarily due to higher cash position throughout the year and higher interest rates.
Net income in 2018 was R$425.2 million compared to R$357.4 million in 2017, mainly due to
the higher operating result.
Operating cash flow totaled R$588.5 million in 2018, compared to R$428.8 million in 2017.
Capex and Other Exploratory Expenses
The Company has funded its required capital expenditures from internally generated funds.
Capital expenditures are also being supported with resources received from the sale of Block
BM-S-8 and the farm-out agreements. The Company maintains a cash position sufficient to
support its funding requirements for the next several years. Investment decisions are planned
at the Consortium level for the different assets of the Company’s portfolio and accounts for the
portion corresponding to its participation in the respective asset.
CAPEX for the year totaled US$73 million, including US$62 million for the Atlanta Field and US$11
million for exploration activities, of which US$5 million is associated with activities in the
Sergipe-Alagoas Basin, and US$5 million relates to seismic acquisition for the blocks acquired
in the 11th ANP Bidding Round.
In 2019, total capital expenditures are planned at US$65 million. The Company plans to invest
US$40 million in in Atlanta Field, which corresponds to 62% of total capex planned for the year.
The remaining funds will be utilized, mainly, for the beginning of exploratory drilling in Block
CAL-M-372 and for the beginning of well drilling in Ceará Basin (blocks acquired in the 11th
Bidding Round).
In 2020, the Company estimates investments of US$90 million in the Atlanta Field, based on the
development of the Full Development System (FDS). Note that the FDS has yet to be approved
by the BS-4 Consortium; however, this estimate considers the initial acquisitions of equipment
required for production at the Field after the EPS. Additional CAPEX for the year includes part
of the drilling of a well in the Sergipe-Alagoas Basin, as well as the drilling of a well in the Ceará
Basin and in CAL-M-372. Total CAPEX expected for 2020 is US$133 million.
12EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
CAPEX net to Enauta (US$ million) 13
2018 TOTAL CAPEX: 2019 TOTAL CAPEX: 2020 TOTAL CAPEX:
US$ 73 MM US$ 65 MM US$ 133 MM
0 4 -
11
43
19
43 90
62
Production Exploration Others Production Exploration Others Production Exploration Others
Others 4
CAL-M-372 4
Manati 3
5
Blocks 11th Round 3
5
SEAL 12
62
BS-4 40
0 10 20 30 40 50 60 70 80 90 100
2018 - TOTAL US$73 MM 2019 - TOTAL US$65 MM 2020 - TOTAL US$133 MM
Cash Position (Cash, Cash Equivalents and Marketable
Securities) and Debt
As of December 31, 2018, the Company had a cash balance of R$1.9 billion, up 33% from R$1.4
billion on December 31, 2017. Currently, 99% of the Company’s funds are invested in Brazilian
real-denominated instruments considered as of a conservative profile and 1% in instruments
denominated in US dollars. As of December 31, 2018 the average annual return of these
investments was 99.4% of the CDI, and 69% of the funds had daily liquidity.
The Company’s debt is comprised of financing raised with FINEP (Financing Agency for Studies
and Projects) and credit facilities from Banco do Nordeste do Brasil. As of December 31, 2018,
total debt was R$298.5 million, compared to R$325.2 million at year-end of 2017 reflecting the
ongoing repayment of the FINEP debt that commenced in September 2016. The Company’s net
cash position on December 31, 2018 was R$1.6 billion.
13EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
Funds from FINEP are part of a financing package aimed at supporting the development of the14
Atlanta Field EPS, and consists of two credit lines, one at a fixed rate of 3.5% per year, and
another at a floating rate linked to TJLP. Both have a grace period of three years and a
repayment period of seven years. The balance of funds disbursed is R$266.0 million. The BNB
financing is directed to exploration investments of two of the Company's assets in Northeast
Brazil. The loan, which carries an interest rate of 4.71% per year with a grace period of five
years.
In July 2017, the Company announced that it had received and accepted an unsolicited offer
from Equinor (former Statoil Brasil Óleo e Gás Ltda.) to purchase its 10% working interest in
Block BM-S-8 for US$379 million. Under the terms of the sale, fifty percent of the total purchase
price was paid at closing upon receipt of ANP and other regulatory approvals. Through end of
December 2018, the Company had received R$234.5 million from Equinor for the first and
second installments of the transaction. The remaining payment, accounting for 38% of the sale
value is due to the Company upon the signing of the Production Individualization Agreement,
or Unitization, of areas.
With the commencement of production at the Atlanta Field, the Company's Market Risk
Management Policy was revised to incorporate, in addition to the currency risk already
monitored, the oil price risk and the interaction between these two components. The main
objectives of the Market Risk Management Policy are:
To hedge the Company’s cash flows;
To mitigate events that may adversely affect its financial flexibility or its access to sources
of capital; and
To preserve the company’s financial solvency.
The Policy currently identifies the exchange US Dollar rate and the price of Brent as relevant
market risks.
The Exchange Rate Risk is relevant when there is an imbalance between the Company’s rights
and obligations in dollars, taking into consideration that the Company's functional currency is
the Real and that most of its cash and a relevant part its revenue today is in Reais. The Company
considers that its rights and obligations in foreign currency are currently balanced.
In addition, the Company constantly evaluates the possibility of hedging future oil production
to increase its cash flow predictability and set the foreign exchange assets it will need to cover
its investment plan and operating expenses in foreign currency, minimizing the need to hedge
foreign exchange with derivatives.
On December 31, 2018, the Company had an option to sell a part of its estimated oil production
in the first three quarters of 2019, equivalent to 322 kbbl at a price of US$70 per barrel. The
average cost of buying these put options (Quarterly Asian PUT) was US$2.6 per barrel.
4Q18 results had a positive impact of R$0.8 million from the exercise of the put option to sell
117k barrels at US$70/barrel. In accordance with the hedge accounting metrics adopted by the
Company, this amount was recognized as operating revenue, together with the premium paid
for these options in the amount of R$0.2 million.
14EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
15
The consolidated financial information of the Company for the quarters and the years ended
December 31, 2018 and December 31, 2017 was prepared by the Company in accordance with
IFRS as issued by IASB.
Annex I | Consolidated Financial Information
(R$ Million) 4Q18 4Q17 ∆% 2018 2017 ∆%
Net income 125.3 193.0 -35.1% 425.2 357.4 19.0%
Amortization and depreciation 30.9 19.2 60.6% 140.1 65.6 113.6%
Net financial result (18.4) (13.0) 42.0% (115.5) (92.3) 25.1%
Income tax and social
22.0 40.5 -45.7% 110.9 77.2 43.6%
contribution
EBITDA(1) 159.8 239.8 -33.4% 560.7 407.9 37.5%
Oil and gas exploration
expenditure with sub (0.1) 0.0 n.a. 14.0 0.0 n.a.
commercial and dry wells (2
EBITDAX(3) 159.7 239.8 -33.4% 574.8 407.9 40.9%
EBITDA Margin(4) 53.5% 165.2% -67.6% 70.3% 81.3% -13.5%
EBITDAX Margin(5) 53.5% 165.2% -67.6% 72.1% 81.3% -11.3%
Net Debt(6) (1,640.4) (1,724.6) -4.9% (1,640.4) (1,724.6) -4.9%
Net Debt/EBITDAX (2.9) (4.2) -32.5% (2.9) (4.2) -32.5%
The Company calculates EBITDA as profit before taxes and social contributions, net financial results and amortization expenses.
(1)
EBITDA is not a financial measure according to Brazilian GAAP or IFRS. It should also not be considered in isolation or as a substitute
for net income, as a measure of operating performance, or as an alternative to operating cash flow as a measure of liquidity. Other
companies may calculate EBITDA differently than us. Furthermore, EBITDA has limitations which inhibit its usefulness as a measure of
the Company’s profitability as it does not consider certain costs inherent in the business, which could significantly impact net results,
such as financial expenses, taxes and amortization. EBITDA is utilized by the Company as an additional measure of its operating
performance.
(2)
Exploration expenses relating to sub-commercial wells or to non-operational volumes.
EBITDAX is a measure used by the oil and gas industry calculated as follows: EBITDA + exploration expenses with sub-commercial
(3)
and dry wells.
(4)
EBITDA divided by net revenue.
(5)
EBITDAX divided by net revenue.
Net cash corresponds to cash, cash equivalents and marketable securities investments excluding total debt, comprising current and
(6)
long-term loans and financing and derivative financial instruments. Net cash is not a measure recognized under Brazilian GAAP, U.S.
GAAP, IFRS or any other generally accepted accounting principles. Other companies may calculate net debt in a different manner.
15EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
Annex II | Balance Sheet 16
(R$ Million) 4Q18 4Q17 ∆%
Current Assets 2,241.1 2,260.8 -0.9%
Cash and cash equivalents 60.0 64.1 -6.3%
Investments 1,870.2 1,739.7 7.5%
Trade accounts receivable 134.4 148.4 -9.4%
Trade accounts receivable – related parties 49.8 181.8 -72.6%
Credits with Partners 12.8 8.0 60.1%
Inventory 34.5 13.3 158.3%
Derivative Financial Instruments 19.9 0.0 n.a.
Other 59.5 105.5 -43.6%
Non-current Assets 1,702.4 1,740.2 -2.2%
Restricted cash 379.8 237.2 60.1%
Investments 0.0 136.1 n.a.
Recoverable taxes 3.8 4.0 -6.8%
Deferred income tax and social contribution 2.8 31.5 -91.0%
Investments 167.9 172.8 -2.9%
Property, plant and equipment 738.4 746.4 -1.1%
Intangible assets 406.8 407.8 -0.3%
Other Non-current Assets 2.9 4.3 -32.6%
TOTAL ASSETS 3,943.5 4,001.0 -1.4%
Current Liabilities 225.6 386.4 -41.6%
Suppliers 75.1 72.7 3.3%
Taxes and contributions payable 29.6 33.6 -12.0%
Remuneration and social obligations 15.3 12.9 18.5%
Payables- related parties 43.5 85.4 -49.1%
Borrowings and Financing 38.9 36.8 5.6%
Provision for research and development 6.9 6.9 -0.7%
Advance to third parties 0.0 57.9 n,a,
Consortium obligations 10.9 66.2 -83.6%
Other 5.6 13.8 -59.6%
Non-current Liabilities 518.3 550.5 -5.9%
Borrowings and financing 250.9 261.7 -4.1%
Provision for abandonment 209.0 288.5 -27.6%
Consortium obligation 57.9 0.0 n,a,
Other trade accounts payable 0.4 0.2 78.0%
Shareholders’ Equity 3,199.6 3,064.1 4.4%
Capital Stock 2,078.1 2,078.1 0.0%
Other comprehensive income 63.1 53.1 18.9%
Profit Reserve 643.7 643.7 0.0%
Capital Reserve 33.6 33.5 0.3%
Treasury Shares (44.1) (44.1) 0.0%
Net income for the period 425.2 299.9 41.8%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 3,943.5 4,001.0 -1.4%
16EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
Annex III | Cash Flow 17
(R$ Million) 4Q18 4Q17 ∆% 2018 2017 ∆%
CASH FLOW FROM OPERATING ACTIVITIES
Lucro líquido do período 125.3 193.0 -35.1% 425.2 357.4 19.0%
Adjustments to reconcile net income to net cash provided by operating activities:
Equity Method (0.6) 0.5 -222.6% (0.1) 1.8 -106.4%
Exchange variation over investment 5.0 (5.6) -188.0% (24.5) (5.0) 386.5%
Amortization of the exploration and
36.5 19.2 89.6% 153.1 65.6 133.5%
development expenditures
Deferred income tax and social
28.7 0.3 n.a. 42.5 (0.9) n.a.
contribution
Financial charges and exchange rate
3.9 2.0 101.1% 15.3 7.8 94.5%
(gain) loss on borrowings and financing
Capitalized interests 0.0 2.2 n.a. 4.1 9.3 -55.8%
Write-off 0.0 0.0 n.a. 14.3 0.2 n.a.
Provision for stock option plan 0.1 (2.6) -104.2% (7.1) (1.2) 514.7%
Provision for income tax and social
(6.7) 40.4 -116.5% 68.3 78.3 -12.7%
contribution
Provision for research and
(0.0) 0.8 -105.8% (5.5) 0.6 n.a.
development
(Increase) decrease in operating assets: 147.9 (109.3) -235.2% 66.3 (89.2) -174.3%
Increase (decrease) in operating liabilities: (180.5) 76.2 -336.8% (163.4) 4.1 n.a.
Net cash inflows from operating
159.6 216.9 -26.4% 588.5 428.8 37.2%
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash inflows from (used in)
(164.5) (204.8) -19.7% (155.9) (355.4) -56.1%
investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash inflows from (used in)
(9.1) (9.0) 0.4% (436.3) (74.8) 483.2%
financing activities
Total exchange variation on cash and
10.0 7.1 41.5% 44.9 2.5 n.a.
cash equivalents
Increase (decrease) in cash and cash
(4.0) 10.2 -139.4% 41.2 1.1 n.a.
equivalents
Cash and cash equivalents at the
64.1 8.6 645.3% 18.8 17.7 6.1%
beginning of the period
Cash and cash equivalents at the end
60.0 18.8 219.1% 60.0 18.8 219.1%
of the period
Increase (decrease) in cash and cash
(4.0) 10.2 -139.3% 41.2 1.1 n.a.
equivalents
17EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
Annex IV | Glossary 18
ANP National Agency of Petroleum. Natural Gas and Fuel
Deep water Water depth of 401 – 1,500 meters.
Shallow water Water depth of 400 meters or less.
Ultra-deep
Water depth of 1,501 meters or more.
water
A depression in the Earth’s crust in which sediments have accumulated that
Basin
could contain oil and/or gas, associated or not.
Part(s) of a sedimentary basin with a polygonal surface defined by the
Block(s) geographic coordinates of its vertices and undefined depth where oil and
natural gas exploration or production activities are carried out.
“Boe” or Barrel A measurement of gas volume converted to barrels of oil using a conversion
of oil factor whereby 1,000 m³ of gas equals 1 m³ of oil/condensate and 1 m³ of
equivalent” oil/condensate equals 6.29 barrels and (energy equivalence).
A grant of access by a country to a company for a defined area and period of
Concession time that transfers certain rights to any hydrocarbons that may be discovered
from the country in question to the concessionaire.
In accordance with the Petroleum Law, a discovery is any occurrence of
petroleum, natural gas or other hydrocarbons, minerals and, in general terms,
mineral reserves located in a given concession, independently of quantity,
Discovery quality or commercial viability that are confirmed by at least two detection or
evaluation methods (defined in the ANP concession agreement). To be
considered commercially feasible, a discovery must present positive returns on
an investment under market conditions for development and production.
E&P Exploration and Production
Process of partial or complete acquisition of concession rights held by another
Farm-in and
company. The company acquiring the concession rights is said to be in the farm-
Farm-out
in process and the company selling concession rights is in the farm-out process.
An area covering a horizontal projection of one or more reservoirs containing
Field
oil and/or natural gas in commercial quantities.
A floating production, storage and offloading (FPSO) unit is a floating vessel
FPSO used by the offshore oil and gas industry for the processing of hydrocarbons
and for oil storage.
GCOS Geological Chance of Success
GCA Gaffney, Cline & Associates
IBAMA Brazilian Institute of Environment and Renewable Natural Resources
Kbbl/d One thousand barrels per day
A company legally appointed to conduct and execute all operations and
Operator activities in the concession area, in accordance with the terms of the concession
agreement signed by the ANP and the concessionaire.
18EARNINGS RELEASE | FOURTH QUARTER AND FULL YEAR OF 2018
19
“Type A” Qualification of the ANP to operate onshore, offshore in shallow to ultra-deep
Operator waters
A prospect is a potential accumulation mapped by geologists or geophysicists
where there is a probability of a commercially viable accumulation of oil and/or
Exploratory natural gas that is ready to be drilled. The five necessary elements for the
Prospect(s) existence of an accumulation (generation, migration, reservoir, seal and
entrapment) must be present and the lack of any of the five means there is
either no accumulation or accumulation that is not commercially viable.
Represent quantities of oil, condensate and natural gas that are potentially
Contingent recoverable from accumulations acknowledged during the development of
Resources projects, but that are not considered commercially recoverable as yet due to
one or more contingencies.
Contingent High estimation of contingent resources to reflect a range of uncertainty
Resources 3C typically assumes a 10% chance of success of reaching or exceeding estimates.
Risked
Prospective Prospective resources multiplied by GCOS.
Resources
Quantities of petroleum expected to be commercially recoverable by applying
Reserves development projects to known accumulations as of a given date and under
defined conditions.
Reserves 1P Sum of proven reserves.
Reserves 2P Sum of proven and probable reserves.
Reserves 3P Sum of proven, probable and possible reserves.
Possible Quantities of petroleum which analysis of geoscience and engineering data
Reserves indicate are less likely to be recovered than probable reserves.
Quantities of petroleum, which by analysis of geoscience and engineering data,
can be estimated with reasonable certainty to be commercially recoverable as
Proven Reserves
of a given date from known reservoirs and under defined economic conditions,
operating methods and government regulations.
Probable Quantities of petroleum that. according to geoscience and engineering data, are
Reserves estimated to have the same chance (50%/50%) of being achieved or exceeded.
19Investor Relations Paula Costa Côrte-Real CFO and Investor Relations Officer Renata Amarante Investor Relations Manager Flávia Gorin Investor Relations Coordinator Helena Dias Investor Relations Intern Av. Almirante Barroso, no 52, sala 1301, Centro - Rio de Janeiro, RJ CEP: 20031-918 Phone: 55 21 3509-5959 E-mail: ri@enauta.com.br www.enauta.com.br/ri About Enauta Enauta is one of the leading private companies in the oil and gas sector in Brazil. With investments in technology, and a commitment to operating safely and responsibly with the environment, our team of experts works diligently to produce energy needed by society. The Company has a balanced asset portfolio spread through the Brazilian coast, and two producing assets: its 45%-owned Manati Field, one of the main suppliers of gas to the Northeast region of Brazil; and the Atlanta Field, located in the deep waters of the Santos Basin, where it is the operator, with a 50% ownership stake. Listed on the Novo Mercado of B3 since 2011, under the ticker symbol QGEP3, Enauta is committed to the sustainability of its operations, investing responsibly and adhering to best practices in the areas of governance and compliance. For more information, visit us at www.enauta.com.br. This press release may contain information relating to future business prospects, estimates of financial and operational results and growth of the company. This information should be considered as projections based exclusively on management expectations regarding future business developments and the availability of capital to finance the Company’s business plan. Such future considerations are substantially subject to changes in market conditions, government regulations, competitive pressures and developments within the sector and the Brazilian economy, among other factors. These points should also be considered along with risks disclosed in documents previously published by the Company. It should be understood that all these factors are subject to change without notice.
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